JP Morgan’s Dimon: ‘We All Want Normalized Rates’

By Tiernan Ray

J.P. Morgan chair and CEO Jamie Dimon, sprinting from a Q2 beat this morning, was on CNBC a short while ago being interviewed by Jim Cramer, defending a view that as rates rise, the U.S. economy will kick in and lead the country to greatness, and lower unemployment.

J.P. Morgan shares are up 17 cents at $55.31.

Responding to Cramer’s compliments about trading results, Dimon thanked “Our folks on the trading floor” who “did a fabulous job across all products, FX, commodities, all of it.”

Asked if he wanted to replace Ben Bernanke as Federal Reserve Board chair, Dimon was adamant it is not in the cards.

“Oh, God, no, please. Every person I know would say Jamie Dimon should not be Fed Chair,” he quipped.

Cramer asked a number of questions about the relatively low level of lending across a number of products, to which Dimon replied that “The american economy is slowly getting stronger, and as it does, the lending will come back.”

“We’re confident you’ll see growth over the years as the economy comes back.”

Conceding Cramer’s point that Wells Fargo (WFC), which also beat this morning, did a much better job in growing mortgage originations, Dimon said “[chair and CEO John] Stumpf is out-mortgaging us; they’ve been doing better for a long time.”

“We had the old Bear Stearns and Wamu, so we have to get the right systems in place.”

“At the end of the day we’re going to have a great mortgage product. But our share has gone up, from 9% to 10% to 11%. You’ll see it go up over time.”

As for the effect of higher rates on mortgages, “When rates go up, it may knock down mortgage originations, but it will filter through all our book of businesses,” boosting the banks business broadly.

“All things being equal, mortgage rates being at 4.5%, refi is going to drop.”

“But that’s okay, that’s just one part of the business.”

On the topic of commercial loans, “We have to adjust, we have a new regulatory environment,” said Dimon.

“Eventually, you’ll be back to business as usual. That may take a year or two. Remember, we have to meet regulatory requirements not just in the U.S. but in 60 countries around the world.”

“I think what’s happening now is the tail end of Basil III, which affects leverage ratios, coverage ratios, all those, things, and which will determine how aggressively banks can grow, pay dividends, return capital.”

“But what is important is we are building great client franchises.”

Another sore spot, noted Cramer, was small business lending, though Dimon pointed out is “not a huge number” for the bank in terms of origination even in the best of times, “and we’re one of the biggest lenders out there.”

“I think it will recover with the economy. The Fed Reserve chairman is doing all he can.”

“We just have a moderate recovery. It’s strengthening, it’s very broad based, across consumers, housing, there is nothing that’s not going to look better.”

Regarding bank regulation and Too Big To Fail, Dimon defended his firm’s reputation, saying “People come to a company because they like what you do for them.”

“This company was a port of safety in the storm, we helped a lot of people, schools, hospitals. Hopefully we will be a port of storm in the next crisis.”

“Not just us, but all these big companies out there are fabulous institutions, and, Yeah, we make mistakes.”

On the topic of the “London Whale” trading scandal, Dimon shook his head and muttered, “The Whale was meant to be a risk reducer, it morphed into something which … I don’t even know what it was.”

“We admitted it to the world. That’s life.”

Cramer asked about the effort this year to try and separate the chairman role from the CEO role, which failed, and whether Dimon would have left the company if it had succeeded.

No, he said, “I would never leave my company high and dry [if they split chairman role].”

Toward the end of the segment, the discussion came back to rising rates. Dimon went into a disquisition on the prospects for economic progress:

We all want normalized rates. Rates have been suppressed around the world for a long time now. But look past the volatility. Six billion people around the world don’t care about rates. If the economy’s strong and we see job growth, we’ll be just fine. We have not only the greatest army in this country, low corruption, wide and deep capital markets, we have tremendous innovation, from Steve Jobs to the factory floor, and now we have natural gas, shale oil. We have a royal flush in this country, we have a gift from God here. We don’t have a divine right to succeed, but if we play our hand right, America’s going to come back and it’s going to blow people’s socks off.

In the final question, Dimon projected that a year from now, “GDP is going to be stronger, and unemployment will be at 6.5%.”

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